5 Reasons Why You Should Never Drop Your Price

I’m sure your business is going well, but what about potential clients? It’s tough out there and you’ll be approached by companies demanding a discount. That’s their prerogative, but should you agree? Never!…

1. Whatever your price, someone can do it cheaper

If you’ve set a fair price, why should you drop it further? If you discount by 5%, the client will demand 10%. Give them that, and they’ll want more.

Whatever your charges, there will always be cheaper alternatives. You have less expensive competitors. The client may know students or family members willing to do it for a few dollars. They can do it themselves for nothing but time. However, they are negotiating with you because they need your services — don’t be afraid to charge accordingly.

Clients may also promise you future projects or recommend your services to others. Great … you can consider discounts or commissions when that work starts rolling in. You don’t need to offer it on day one.

2. Cancellation costs your client more

Once you reach the negotiation stage, the client has decided to do business with you. You may be their only option. If the project falls apart, the client will need to start negotiations again with an alternative supplier. There’s no guarantee they’ll be better or cost less than you.

In my experience, the biggest hagglers have an inflated opinion of their own business prowess. They’re also the ones who panic most when you suggest terminating the deal.

3. It devalues your service

IT development is a highly-specialized skill. You cannot teach someone to program — they must do it for themselves and it can take many years to become competent. Even web development masters such as SitePoint readers must continually learn to stay on top form.

If development were not a sophisticated intellectual exercise, anyone could do it and prices would tumble. Until that day arrives, there’s no need to devalue what you do.

4. Hagglers are hassle

Alarm bells should ring when a client demands a fixed price or discount prior to discussing their project. In general, these people don’t understand what they need. Similarly, there will be clients working to tight budget constraints. Sympathize by all means — but they’re never going to build a better Facebook for $2,000. It’s not your problem.

Those who bombard you with demands before the project commences won’t stop when agreement is reached. They’re usually the ones who increase scope or change direction on a daily basis. They only go quiet when payment is due…

Unreasonable clients will sap your time, energy and profits. Will you miss out on better projects while you’re working for them?

5. But you can lower costs

There’s no need to take offense or be arrogant toward clients requesting a discount. There’s a simple way to agree with all their demands: remove project features and services. Obviously you should warn that a premium may be charged for maintenance on their half-completed systems.

Under what circumstances would you offer a discount to a client?

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  • http://www.fuzestudios.com Hassan Nasir

    I agree with it. We should set some fair base prices and then never get down from there. Everyone is competing on the price now a days but their quality is not top notch. We should make clients realize is what you pay is what you get and together we make this world a better place. :)

  • http://www.bathmarketingconsultancy.co.uk Paul Tagent

    Good post.

    To me it is about demonstrating “value” and therefore, trying to buy business can seriously undervalue what you do. For example, I have seen someone on Twitter offering website design for £100 and free hosting. How can anyone offer that unless it is complete cr**?!

    I know it depends on the industry, but I don’t think I have heard of a dentist saying that they will pull out a tooth for a bargain or a solicitor offering budget divorces!

    If you don’t value what you do, then neither will a client and, yes, there is always someone who will do something cheap so let them have the work!

  • http://www.drakeintelgroup.com Karl Gephart

    Great points, Craig. I hate the fractured logic used by most prospects and clients, “Well, it would just take you a few minutes to make that change for me.” That’s not the point. How long would it take the CLIENT to make the change? It’s all about contracts.

    • http://www.optimalworks.net/ Craig Buckler

      One of my favorite client quotes is: “I assume this won’t take long?”
      That always translates to: “I want a new feature. I’ve made it sound simple, but I really don’t have a clue and I don’t want to pay too much for it.”

      If in doubt, ask for a detailed specification and estimate up-front. But stress that the estimate is subject to change if they refine or alter their requirements.

      • Seona Bellamy

        I wholeheartedly agree with you, Karl and Craig. One of the most annoying things you can hear from a client is “just”, as in: “But you just need to…” or “But can’t you just…” In my books it comes second only to “It’s a very small/simple/quick change/fix”. I’ve gotten both of these regularly while I’ve been working as an in-house developer too, which has the advantage of making it easier to say “Great, how about I leave it to you since it’s so quick and easy then?” -_-

        I’ve always found putting a price on what I do difficult, though. Especially since most of my business in the past has come through word of mouth, so the majority of my clients have been people I know socially. It’s difficult to balance wanting to do nice things for your friends (like give them a discount) with wanting to make sure you can pay your rent.

  • http://www.jeremybuff.com Jeremy Buff

    I think the most important part of entering into a new contact with a client is making it absolutely clear that you’re the professional, and they need your expertise.

  • http://lienhard.net Steve Lienhard

    I dropped my price for a client. Their testimonial said “…and his fees were very reasonable.” Ouch! Never again. Taking your advice to heart.

  • http://www.mattearly.com Matt Early

    The way I price things is fairly simple, charge more, and allow yourself more freedom to work more exclusively. Obviously, it has its pros and cons, but for me its the best way to work. The service I give is very much speciality, and its a treat for the end user. Don’t sell yourself short.

  • http://easternshoremedia.com John Orban

    Look, when folks don’t understand what they are getting and/or how to value what they are getting, they revert to the one thing they DO understand and that’s dollars and cents. I know that sounds a bit Ivory Towerish, but after 20+ years in sales that’s what I’ve come to realize.

    And let me tell you something else I learned. When you drop your price for someone, even if you get the job, you will rue the day because they will beat you TO DEATH with further demands. “You told me you’d _____”. “This isn’t what you said it would be.”

    The best news you can hear from someone is that they want you to lower your price. That should tell you to start walking out the door.

    In fact, I challenge you right now to INCREASE your rate because I’m guessing most of you are undervaluing your work. Yeah, you’re going to lose some customers, but the ones you get will value what you do and appreciate your work more. You might have to pound the pavement a bit more, but, hey, that’s what it’s all about. If you sitting on your can waiting for business to walk in the door, trust me, NO price is going to be low enough to generate business.

    Just my two cents…

  • http://smallbusinessmarketingsucks.com/ John Tabita

    When a client asks for a discount, I say “No problem. Pay the entire fee upfront and I’ll give you 10 percent off.”

  • http://es11.com Micah Toop

    Perfect timing. I read this just as I was sending out a revised (lower) cost estimate, requested by the client. I subscribe to the “remove features and services” model. It doesn’t work in all circumstances, and some we have to let go elsewhere… but some respect the idea that if they pay you less, they will get a streamlined project and have to trust your experience on some of the areas they would normally (at full price) have input on.

  • http://www.btyrrell.com Tyrrell Web & Design, LLC

    A pricing structure based on page count works best for me. A home page and the next 4 pages are one core price for each. All additional pages after the first 5 have a core price structure that is significantly less. So this way it is easy to ballpark a 10 page Web site, knowing what the core pricing will be. (clients love a “ballpark” price). Remove a page and their cost goes down. Add a complicated feature and the cost goes up.

    If I like them I can give them Web hosting free for 6 months or a year, it’s ok for me to toss a bone to close the deal. Web hosting is the best give away since it cost so little with bulk hosting. Dale Carnegie says when it comes to negotiations no one is a loser. Both side are winners.

    • Pierre Cornelissen

      I am busy revamping my pricing structure and will call it the “Cafeteria Option”; the new client will see a core price say for about 5 pages and then they can choose from a list of add-ons to enhance their website. I think this will give new start-ups a “pay as you grow” option. I’d also give them the option to go with a “baseline featured” component or a more “advanced featured” component which will cost a little bit more.

  • http://seoservices.ie Sean Quinn

    Great article and advice. I am with you guys regards people asking for a site for next to nothing. You have services now like wix and so many others. People can now put their own site together in a matter of minutes (Well that’s what they are lead to believe) Only thing for me is these sites have little or no seo optimizing done. So it sits there in limbo, waiting for some stragglers to find it by pure chance. No doubt they will too, by pure luck.

  • http://www.18aproductions.co.uk Lisa

    Too much of this post was familiar! I tend to go with the “reduce features = reduced price” approach, but sometimes that means I pay the cost of spending hours and hours (or days) repeatedly re-quoting in order to bring the cost down for them. So I’m helping to make us less money! And it hits a point where I’ve spent so long re-quoting (“what if we did it this way, what if we had this bit instead and added that later”) that I can’t go any lower because of the time they’ve taken up already. I hate quoting – it’s the hardest part of my job! Lx

  • http://bit.ly/kristofbernaert Kristof Bernaert

    you can get low cost everywhere. that doesn’t mean you have to go along with too.

  • http://www.trafficio.com Ron

    Well said Craig, I hope more take this sort of approach. One thing to watch out for especially with with a haggler is credit card charge backs. I use to take credit cards but not after I received my first charge back in 10 years. I didn’t realize how fast a client can really put a squeeze on you in this sort of way. We completed development and client was super happy. The client proceeded to ask for “extras” which I gave him a few that would have cost a couple thousand but he had spent quite a bit so I gave them to him. When I cut off the freebees he kept asking for them, then started demanding. I sent him an invoice with all line items of what it would have cost him with the freebees and also wrote him a quote for what he wanted extra at this point at full pop. The client flipped his lid and did a charge back on the whole project amount through his credit card company. I got my money back because he signed the credit card receipt, thank god but he really messed me up battling this whole situation. In the end I took the freebees back, out of principle and told the client to kick rocks. Be careful with who you take credit cards from.

    Seona, I charge my friends more. Why? So they leave me alone and we stay friends :)